FILED FEB 13 2017 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT 4 In re: ) BAP No. CC-16-1118-LNTa 5 ) JOHN LOUIS AVITABILE, ) Bk. No. 8:14-bk-14381-ES 6 ) Debtor. ) 7 ______________________________) ) 8 JOHN LOUIS AVITABILE, ) ) 9 Appellant, ) ) 10 v. ) MEMORANDUM* ) 11 KATHY ROCHELEAU; ) BRUCE ROCHELEAU, ) 12 ) Appellees. ) 13 ______________________________) 14 Argued and Submitted on January 19, 2017 at Pasadena, California 15 Filed - February 13, 2017 16 Appeal from the United States Bankruptcy Court 17 for the Central District of California 18 Honorable Erithe A. Smith, Bankruptcy Judge, Presiding _________________________ 19 Appearances: Michael A. Wallin of Slater Hersey and Lieberman 20 LLP argued for appellant; Timothy Krantz argued for appellees. 21 _________________________ 22 Before: LAFFERTY, TAYLOR, and NOVACK,** Bankruptcy Judges. 23 24 * This disposition is not appropriate for publication. 25 Although it may be cited for whatever persuasive value it may 26 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8024-1. 27 ** Hon. Charles Novack, United States Bankruptcy Judge for 28 the Northern District of California, sitting by designation.
1 INTRODUCTION 2 Judgment Creditors Kathy and Bruce Rocheleau missed the 3 deadline for filing a formal proof of claim against the estate of 4 Debtor John Avitabile. Upon filing a formal proof of claim 5 almost eight months after the claims bar date, the Rocheleaus 6 also filed a motion requesting that the bankruptcy court allow 7 their claim, arguing that (1) their failure to timely file a 8 proof of claim was due to “excusable neglect,” and the bankruptcy 9 court should deem it timely pursuant to Rule 9006(b)(1);1 and 10 (2) the formal proof of claim should be deemed timely because, 11 prior to the expiration of the claims bar date, the Rocheleaus 12 sent a letter to the chapter 7 trustee that constituted a timely 13 “informal” proof of claim. After a hearing at which Debtor 14 opposed the requested relief, the bankruptcy court rejected the 15 Rocheleaus’ excusable neglect argument but agreed that their 16 letter constituted an informal proof of claim. Debtor appealed. 17 We AFFIRM. 18 FACTS 19 A. The Prepetition Judgment and the Bankruptcy Filing 20 On February 10, 2014, the Orange County Superior Court 21 entered a default judgment against Debtor John Avitabile 22 (“Avitabile”) in favor of Kathy and Bruce Rocheleau 23 (collectively, the “Rocheleaus”) in the amount of $513,976.35. 24 The judgment represented the expenses for repair of construction 25 26 1 Unless otherwise indicated, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of Bankruptcy 28 Procedure.
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1 work that the Rocheleaus stated was not properly performed by 2 Avitabile. 3 On July 15, 2014, Avitabile filed a voluntary petition for 4 relief under chapter 7. On the front page of the petition, 5 Avitabile indicated that there were no assets in the estate and 6 therefore no funds would be available for distribution to 7 unsecured creditors. Consistent with that assertion, Avitabile 8 did not list any interest in real property on Schedule A. 9 Schedule F listed the debt owed to the Rocheleaus at $600,000 and 10 did not indicate that the debt was disputed or otherwise invalid. 11 The creditor mailing matrix filed along with the petition listed 12 the Rocheleaus at their home address. 13 B. Letter from Avitabile to the Chapter 7 Trustee 14 On August 17, 2014, Timothy Krantz (“Krantz”), counsel to 15 the Rocheleaus, sent the chapter 7 trustee Thomas H. Casey (the 16 “Trustee”) a one-page letter (the “August 17 Letter”) suggesting 17 that Avitabile held an apparently undisclosed interest in a trust 18 that owned certain real property in Trabuco Canyon, California. 19 In the opening paragraph of the August 17 Letter, Krantz stated: 20 I represent an unsecured creditor, Bruce Rocheleau. My client obtained a Judgment of $513,976.35 against the 21 debtor on 2/10/14. My client wanted me to pass on to you the following information about possible assets 22 that the debtor may have but is not disclosing. You may want to ask him about [it] during the 341a meeting 23 of creditors. 24 C. The Notice of Dividend and the Claims Bar Date 25 On March 12, 2015, the Trustee filed a Notification of Asset 26 Case (the “Notification”) in which he indicated that assets would 27 be administered in the case; on the same date the Clerk of the 28 Court sent out a Notice of Possible Dividend and Order Fixing
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1 Time to File Claims (the “Notice”) to all creditors listed in the 2 mailing matrix, thereby setting the deadline for filing proofs of 3 claim for June 15, 2015. 4 The Notice was sent to the Rocheleaus at the address listed 5 on the mailing matrix; however, the Rocheleaus deny its receipt. 6 In any event, it is undisputed that the Rocheleaus did not file a 7 formal proof of claim prior to the June 15, 2015 deadline. 8 D. The Filing of the August 17 Letter with the Bankruptcy Court 9 On March 12, 2015, the same day that the Trustee filed the 10 Notification and the Clerk of the Court sent out the Notice, the 11 Trustee also filed his Motion for Order Extending Time to File 12 11 U.S.C. § 727 Complaint (the “Extension Motion”). The 13 Extension Motion sought additional time for the Trustee to 14 determine whether filing a complaint for denial of discharge 15 pursuant to Section 727 was warranted. The Extension Motion 16 stated that the Trustee had recently discovered that Avitabile 17 held an unscheduled beneficial interest in a trust established by 18 Avitabile’s mother prior to the filing of the petition. The 19 Extension Motion further stated that the Trustee was “only made 20 aware of this asset by a creditor who had obtained a judgment 21 against [Avitabile] in the amount of $513,976.33 prior to the 22 Petition Date.” Furthermore, a copy of the August 17 Letter was 23 attached to the Extension Motion as an exhibit. 24 E. The Settlement 25 On January 25, 2016, the Trustee and Avitabile entered into 26 a settlement agreement regarding the estate’s potential interest 27 in the undisclosed family trust. Pursuant to the settlement 28 agreement, the estate would receive $76,750 in exchange for the
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1 release of the estate’s interest in the trust. The settlement 2 agreement also set forth the proposed distribution of the $76,750 3 to be received by the estate. Although the settlement agreement 4 acknowledged the existence of the Rocheleaus’ judgment against 5 Avitabile, it did not include the debt owed to the Rocheleaus as 6 a claim that would be paid from the settlement, presumably 7 because they had not filed a proof of claim. 8 A copy of the settlement agreement was filed with the 9 bankruptcy court and served on all parties, including the 10 Rocheleaus. The Rocheleaus contended that they first became 11 aware that there would be a dividend in the case when they 12 received a copy of the motion to approve settlement; and they 13 were alarmed to read that they were not listed as unsecured 14 creditors who would receive a distribution from the estate. 15 Nevertheless, the Rocheleaus did not file an opposition to the 16 motion to approve the settlement agreement. On February 19, 17 2016, the bankruptcy court entered an order approving the 18 settlement agreement. 19 F. The Rocheleaus’ Proof of Claim and Accompanying Motion 20 On February 8, 2016, the Rocheleaus filed a formal proof of 21 claim, which included as an attachment a copy of the state court 22 judgment. Shortly thereafter, on February 12, 2016, they also 23 filed the Motion for Order to Allow Late Filing of Proof of Claim 24 (the “Claim Motion”). 25 The Claim Motion requested that the bankruptcy court allow 26 the Rocheleaus’ formal proof of claim as timely based on two 27 alternative theories: first, that the June 15, 2015 deadline to 28 file a proof of claim should be extended as to the Rocheleaus
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1 because their mistaken belief that no proof of claim had to be 2 filed was the result of “excusable neglect”; second, that 3 pursuant to applicable Ninth Circuit case law, the August 17 4 Letter qualified as a timely informal proof of claim to which the 5 late-filed claim could relate back and therefore the formal claim 6 should be deemed an amendment to the informal claim. Avitabile 7 opposed the Claim Motion2 asserting that the August 17 Letter did 8 not meet the requirements for an informal proof of claim, mainly 9 because it was not brought to the attention of the bankruptcy 10 court. 11 G. The Bankruptcy Court’s Disposition 12 On April 12, 2016, the bankruptcy court held a hearing on 13 the Claim Motion and granted the Claim Motion in part and 14 rejected it in part. 15 The bankruptcy court denied the Rocheleaus’ excusable 16 neglect argument because it determined that the application of 17 Rule 9006 was limited by Rule 3002(c), which controls the 18 expansion of the deadline under which creditors must file a proof 19 of claim against the estate in chapter 7 cases. Specifically, 20 the bankruptcy court determined that Rule 3002(c) listed only six 21 exceptions to the requirement to timely file a proof of claim, 22 and excusable neglect was not one of them. This aspect of the 23 bankruptcy court’s ruling is not contested in this appeal. 24 The bankruptcy court granted the Claim Motion insofar as it 25 asserted that the August 17 Letter satisfied the requirements set 26 27 2 As part of the settlement, the Trustee assigned standing 28 to oppose the Claim Motion to Avitabile.
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1 forth for a finding that it was a timely informal proof of claim. 2 Avitabile timely appealed. 3 JURISDICTION 4 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 5 §§ 1334 and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. 6 § 158. 7 ISSUE 8 Did the bankruptcy court err in determining that the 9 August 17 Letter constituted a timely informal proof of claim? 10 STANDARD OF REVIEW 11 Whether a document satisfies the requirements for an 12 informal proof of claim is a question of law that we review de 13 novo. Dicker v. Dye (In re Edelman), 237 B.R. 146, 150 (9th Cir. 14 BAP 1999) (citing Pizza of Hawaii, Inc. v. Shakey’s, Inc. (Matter 15 of Pizza of Hawaii, Inc.), 761 F.2d 1374 (9th Cir. 1985)). 16 DISCUSSION 17 The Ninth Circuit has long applied a rule of “liberality in 18 amendments” to creditors’ proofs of claim, permitting a later 19 filed claim to relate back to a prior informal claim. Wright v. 20 Holm (In re Holm), 931 F.2d 620, 622 (9th Cir. 1991); County of 21 Napa v. Franciscan Vineyards, Inc. (In re Franciscan Vineyards, 22 Inc.), 597 F.2d 181, 182-83 (9th Cir. 1979) (citing 23 In re Patterson-MacDonald Shipbldg. Co., 293 F. 190, 191 (9th 24 Cir. 1923)). To constitute an informal proof of claim, a 25 document must: (1) be presented via a writing; (2) be presented 26 within the time frame for the filing of claims; (3) be asserted 27 by or on behalf of the creditor; (4) be brought to the attention 28 of the bankruptcy court; (5) indicate an intent to assert a claim
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1 against the estate in a set or determinable amount. 2 In re Franciscan Vineyards, Inc., 597 F.2d at 182-83; Pacific 3 Resource Credit Union v. Fish (In re Fish), 456 B.R. 413, 417 4 (9th Cir. BAP 2011); In re Edelman, 237 B.R. at 155. 5 Avitabile does not dispute that the August 17 Letter was a 6 writing presented on behalf of the Rocheleaus within the time 7 frame for filing proofs of claim or that it indicated an intent 8 to assert a claim against the estate; the only element at issue 9 is whether the August 17 Letter was brought to the attention of 10 the bankruptcy court.3 11 The Ninth Circuit has expressly determined that it is not 12 necessary that an informal proof of claim be filed with the 13 bankruptcy court or otherwise appear on the bankruptcy court’s 14 record in order to satisfy this requirement. In re Holm, 15 931 F.2d at 622 (“The document that purports to be an informal 16 proof of claim need not be filed in the court.”); 17 In re Franciscan Vineyards, Inc., 597 F.2d at 183 (informal 18 3 19 With respect to the second element, whether the August 17 Letter was presented within the time frame for filing proofs of 20 claim, the bankruptcy court found that this element was met because under Rule 3002, (in the absence of other court order) a 21 proof of claim is timely if filed no later than 90 days after the first date set for the § 341 meeting. However, when the 22 August 17 Letter was sent to Trustee, no claims bar date had been 23 set because the case appeared to be a no asset chapter 7. We are not convinced that a document presented before a claims bar date 24 has been set could always satisfy the timing requirement. Such a document would not be relevant where no assets are available to 25 pay creditors, and the creditor could not plausibly argue that it 26 intended to assert a claim against an estate with no assets. But to the extent the bankruptcy court erred in this aspect of its 27 ruling, it was harmless error because the August 17 Letter was filed with the court as an attachment to the Extension Motion on 28 the same day the claims bar date was set.
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1 letter sent to the trustee who did not forward it to the 2 bankruptcy court or any other party); In re Anderson-Walker 3 Indus., Inc., 798 F.2d 1285, 1286 (9th Cir. 1986) (informal 4 letter sent to trustee’s counsel in response to a collection 5 letter demanding payment to the estate); In re Sambo’s 6 Restaurants, Inc., 754 F.2d 811, 812 (9th Cir. 1985) (wrongful 7 death complaint filed in a different jurisdiction from bankruptcy 8 case). 9 Moreover, although the Rocheleaus sent the August 17 Letter 10 to the Trustee and not the bankruptcy court, a closer look at the 11 record demonstrates that the August 17 Letter was filed with the 12 bankruptcy court on March 12, 2015 as an exhibit to the Extension 13 Motion. The Extension Motion not only included a copy of the 14 August 17 Letter but it also explained that the information from 15 the Rocheleaus was the reason why the Trustee was able to uncover 16 Avitabile’s interest in the undisclosed asset. The certificate 17 of service attached to the Extension Motion reflects that service 18 was made on Avitabile, Avitabile’s counsel, the United States 19 Trustee, and all creditors. It is undisputed that Avitabile 20 received a copy of the August 17 Letter after it was filed with 21 the bankruptcy court. Thus, even if the document had to be filed 22 with the bankruptcy court, the Extension Motion satisfied that 23 requirement. 24 CONCLUSION 25 For the reasons set forth above, we find no error in the 26 bankruptcy court’s allowance of the Rocheleaus’ formal proof of 27 claim as an amendment to their timely informal proof of claim. 28 Accordingly, we AFFIRM.
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